Europe PP buyers ponder 2020 contract permutations

 Polypropylene (PP) buyers and sellers in Europe are winding down for the holidays, and many are taking their 2020 pricing discussions to the wire.

One of the discussions is how much premium over propylene to accept as a buyer, if a propylene-plus contract is what takes your fancy.

This delta has changed over the years, with anybody in 2015 having such a deal getting a bonus at the end of the year for being so clever as to be able to buy below the spot market when product was tight.

In 2012, however, such a contract might have lost you your job, so it’s a gamble, but one that has to be taken.

Many buyers have a cocktail of options, just in case. These include formula-related contracts and propylene plus, with usually some freely negotiated business and some spot.

How much spot versus contract to take is another decision buyers have to take, and for 2020, many buyers are increasing the volume of spot they take.

The shadow of 2015 still hangs over the market, however. It is looming less large, but remains.

Buyers expect the market to be moving in their favour in 2020, and some said they have already managed to get a better deal than 2019, based on a lower spread over propylene than formerly.

Annual contracts are made to ensure a regular flow of material, and volumes are generally decided for the year.  There is sometimes an end-year discount if agreed volumes are reached, which is applied to volumes taken throughout the year.